The trustee handling the Chapter 7 bankruptcy of Axium International Inc. on Monday sued two former top officials of the defunct Burbank entertainment industry payroll firm, alleging years of mismanagement and misappropriation of corporate assets after the company changed hands in 2002.
The lawsuit, filed in U.S. Bankruptcy Court in Los Angeles, seeks tens of millions of dollars in damages from John Visconti, the company's former chairman and chief executive, and Ronald Garber, former vice-chairman and chief operating officer. Both men still live in Los Angeles.
Axium and its subsidiaries were considered the entertainment industry's third largest payroll services firm, at one time handling as much as $1.8 billion in payroll annually, when the company abruptly shut its doors in January 2008. The closure threw 1,000 employees out of work around the country and left numerous film production companies scrambling to find money to pay their crews.
Under the direction of Visconti and Garber, Axium suffered profound financial and corporate mismanagement, punctuated by wasteful spending that was "perhaps the worst I have seen in my experience," said trustee Howard Ehrenberg, who has been working with business bankruptcy specialists SulmeyerKupetz and a team of forensic accountants for more than a year to unravel the company's financials.
The lawsuit alleges a pattern of reckless corporate spending that supported lavish lifestyles for Visconti and Garber that included luxury cars, corporate jets, travel and entertainment.
Creditors, many of them Axium's former clients, have more than $500 million in claims pending. At the time of the filing the company owed $100 million in unpaid federal payroll taxes, of which $80 million is still outstanding.
"How a payroll company could ever owe so much in payroll taxes was my launching point for a variety of investigations," Ehrenberg said, noting that company's auditors already have been sued by the estate. The complaint against Visconti and Garber is being handled by the L.A. law firm of Reed Smith LLP.
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